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Rupee depreciation indicates high trade deficits

Recently, the Indian Rupee has depreciated significantly against the US Dollar and it reached a 6-month low towards the end of May at 55.41. This depreciation signifies increasing demand for US Dollar, primarily indicating high trade deficit in the uncertain current account environment. Also, currently the US Dollar is gaining value against all major global currencies with chances of cut down in US monetary stimulus restricting the supply of US Dollar in the market. This is already negating the positive impact of improved FII inflows on Rupee and it may be expected to depreciate even further in the coming months.